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Despite not having spent a dime on the US firm, Fiat is widely credited with “rescuing” Chrysler. Here’s another way of looking at it: the United States taxpayers bailed out Fiat, an Italian firm with no presence in the US market. For no money down, Fiat got a 20 percent stake in a Chrysler that, although troubled, had been rinsed clean in bankruptcy. Now, analysts looking at Fiat’s spin-off of its automotive unit are telling Automotive News [sub] that
Fiat’s 20 percent stake in Chrysler, currently with a zero book value, is the biggest positive element seen by analysts for the new Fiat S.p.A., which will comprise the Fiat, Alfa Romeo, Lancia, Ferrari and Maserati car brands when it starts trading on Jan. 3. Fiat’s truck and tractor units will be spun off on the same day into a new unit called Fiat Industrial S.p.
Analyst estimates place the value of Fiat’s 20 percent stake in Chrysler at between 45 and 53 percent. Including synergies, Fiat’s stake in Chrysler is said to account for between 60 and 74 percent of Fiat Automotive’s projected value of €5.20 and €7.40 per share. The fact that the US auto task force “struggled to persuade [Fiat CEO Sergio Marchionne] to put up some cash” for a deal that more than doubled his company’s value, makes this news something of an embarrassment for the White House. Fiat is likely to eventually buy a controlling stake in Chrysler, and if, as has been widely speculated, GM ends up being owned by Chinese firms, the Great American Auto Bailout will end with both “rescued” firms in foreign ownership. Which, incidentally, is how the British Leyland experiment ended. And it’s all just a little bit of history repeating…
36 Comments on “Analysts: Chrysler Worth More Than Fiat...”
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GM isn’t going to end up “owned” by Chinese firms. SAIC will probably end up holding something like 5%, if that, and the rest will be held mostly by the same array of institutions that hold most other big US industrial firms — namely, mutual funds, ETFs, hedge funds, and the like. Is “widely speculated” now a synonym for “ranted about in far-right forums”?
SAIC will hold 5% in GM Holding company. But also 50% in GM China and have interests in GM Korea, GM India etc. and that is now. If Opel will need money, and i think that is a certainty, than they will get also a part of that if GM doesn’t have the money for it.
SAIC will (sooner then later) hold significant percentages in the GM divisions that are profitable ie everything except GM North America (and Opel, if they’re still around in 5 years).
By having a business partners that can control essential cash flows (remember, they’re the profitable ones) they don’t need 51% of the company stock.
Opel is profitable if you look at the profits their designs make. It is more a matter of accountancy that shows loses
I will get a good chuckle out of this headline “GM’s Chinese owners struggle to understand concept of union labor”
uh, no.
20% of chrysler is worth more than the 100% stake in Ferrari? Methinks the analysts need to go look at the books again – the brand equity of Ferrari alone would be worth more than the 20% stake in Chrysler.
and how exactly would you tap that “brand equity”? Create a car high volume crap-mobile and slap the Ferrari badge on it?
The Ferrari brand means they can have a huge margin for a very small volume product. That isn’t worth much.
I have read in several different places that Ferrari’s greatest source of income is logo merchandise (shirts, hats, pens, computers, eyewear, etc). This rings true because they have been setting up “Ferrari Boutiques” in posh locales around the world, e.g. Manhattan http://www.insideline.com/ferrari/ferrari-store-opens-in-the-big-apple.html
Also, check out the Ferrari store web page and all the stuff you can buy with that damn dancing horse on it!
lw-
That Brand Equity can be seen in full display in Dubai at “Ferrari World,” in every hat, flag, shirt coat and merchandise that Marenello, and every engineering contract that powers their F1 team. If Ferrari were ever to be sold into the market, PE firms wouldn’t just look at the value of the current revenue, but all of the extensions that Brand Equity can drive, which of course dramatically increases the value of the current revenue/profit
The logo merchandise angle may be true. I’m not the sort that would wear the hat or the coats, but I’ve found the Ferrari line of men’s colognes quite excellent, particularly because they can be had without breaking the bank if one knows where to shop.
Uhhh no indeed.
At the time when FIAT took over Chrysler, nobody else was willing to touch it with a stick (except the US gubment). It was a worthless company churning out terrible products that Hyundai/Kia would have been ashamed of 5 years ago. Plus they had not only union contracts but also contracts in place with suppliers to supply them with TERRIBLE interior plastics for years to come. People in Europe were scratching their heads thinking this would signal the end of FIAT.
And now it’s supposed to be the golden goose? I don’t think so. They’re only just starting to phase out/improve a couple of dogs from their line-up…Product might not be everything but it is a lot.
Just too hillarious.
I’m noit suprised by this at all, Fiat sucks and Chrysler actually could do well if things work out in the future. Chrysler has a better chance than GM for sure. It’s not operating under the Government Motors stigma.
Chrysler has only the North American market. It is dead without Fiat car designs.
“It’s not operating under the Government Motors stigma.”
It isn’t?
Only in the sense that its initials aren’t GM. It is a government motors but not the Government Motors. Plus it’s not run by the idiots at GM so it surely has a better chance of surviving.
GM is majority owned by the government while Chrysler is majority owned by the unions (I don’t which is scarier). Someone here can give you the exact percentages. That’s why the IPO for GM is pushed, but here very little from Chrysler.
The politcal terrorists and the envy-ridden gimme-gimme retards who vote for them are destroying real wealth in the USA. Most publik skool voters are too stupid and infantile to even know what is going on.
Ed good point on Leyland. With regards to something for next to nothing, Marchionne did try to grab Opel for nothing down. He has Jeep and he has Dodge. Good luck with the Chrysler brand.
I believe this movie would be considered a sequel. In the original (released in 2005) the plot involves Mr. Marchionne wrestling $2 billion away from General Motors in a contract settlement. Hopefully, there is no threequel involving Ford.
Fiat’s ownership stake in Chrysler represents textbook opportunism. No matter the cost the US government felt it necessary to patch together a deal to “save” Chrysler. Marchionne used this desperation to swing a deal that would otherwise not have been possible.
+1
People seem to have forgotten that Fiat walked away with $2 billion in palimony from GM back in 2005. Not that this would have helped GM avoid eventual bankruptcy, but it is ironic.
‘Tis true Fiat paid nothing up front, but they still have to lift Chrysler out of the basement with heavy expenditures on vehicle development, marketing and the like. Who else was waiting in the wings willing to take on that task on any terms?
+1
A more accurate version of the headline might have been “Chrysler under FIAT management worth more than FIAT was on its own”
Market analysts have a marvellous way of making edited statements of the obvious sound profound. Neither company had got it right with regards to globalisation, but each company’s strengths complements the others’ weaknesses. Chrysler brings a (salvageable if dented) US brand equity and big car/truck know how, FIAT brings a genuine global presence and solid experience in small cars and fuel efficient engines.
Blended into one company, OK they have too many brands, and (on both sides) some baggage in terms of reputation hangovers from past mistakes, but otherwise it looks to be a pretty solid foundation to build a real 21st century global auto maker from. Would Chrysler have that by itself? Was any other auto manufacturer better matched to balance out Chrysler’s short comings?
Chrysler worth more than Fiat?
Marchionne is not a stupid man. I’m sure he knew that from the get-go. He has Jeep, and Dodge. If Chrysler branded cars disappeared of the face af the planet, I doubt they would be missed. He has a couple of good brands and some good German technology to work with. I think he’ll do OK.
Thankfully that “good German technology” has been mostly purged and the patient is feeling much better now.
SAIC really shouldn’t try to buy GM North America/ Europe. It already has 2 brands in MG and Roewe that are growing very quickly and I can already see them being the next Hyundai. Why buy all those expensive foreign plants and liabilities. Far better to compete with GM than to buy them.
Gotta disagree on the Leyland comparison – BL’s core was Morris/Austin both of which simply vanished (both in terms of branding and engineering character) under Leyland management. Rover staggered on under british ownership for a while as a badge slapped onto Hondas, Triumph, Wolesely et al had just vanished before the sell offs started.
OK Jaguar and Land Rover wound up passed along through foreign hands, and the Chinese keep making noises about resurrecting MG but those were tiny niche brands in BL’s original portfolio. The situations with GM and Chrysler don’t really compare as yet. If in 10 years time the italians have sold Jeep to the Swedes and shut down the rest of Chrysler as terminally unmanageable, while the Chinese are spouting vaporware promises about a new Buick (the last of the 2020 GM brands) then we can talk BL comparisons but somehow I doubt that’s a future which will come to pass.
1. Keep in mind that at least one half of analysis is purely anal.
2. If one wants to debate the value of Ferrari’s brand equity vs. Chrysler/Dodge/Jeep, I think it’s a tie. I’m still waiting for someone at TTAC to review one of the many strollers I see with the “Jeep” brand on it. Not everyone can afford a Ferrari, and most know that $40 is too much to pay for a t-shirt.
Jeep, however, is a different story. Just about anybody who can afford a car can afford a Wrangler, or a Jeep branded t-shirt, and acres of moms are doing their best to toughen-up with a Jeep stroller.
I wanted to buy a Jeep stroller, but it didn’t fit a newborn. At 40$ is a bargain.
However, one of my friends did. Nice. But gladly I passed.
It wouldn’t hurt me to buy a toddler seat like the ones that appeared in the New Chrysler ad some years ago.
Most of these ‘analysts’ have been wrong so many times that their predictions/forecasts/witchcraft, are completely meaningless. Weren’t they all saying 2 weeks ago that Chrysler was dead? Chrysler and FIAT have excellent synergies and will complement each other with the right leadership. My personal prediction/forecast/witchcraft is that in 10 years this conglomerate? will be an automotive powerhouse. Also that the ‘Chrysler’ brand will be a jewel in that crown.
“… the Great American Auto Bailout will end with both “rescued” firms in foreign ownership. Which, incidentally, is how the British Leyland experiment ended.”
Well, let’s see, the alternative would be GM and Chrysler gone, Ford a little bigger (25 – 50%, based on past experiences with other companies/brands going out of business) and the Japanese/Koreans (eventually Chinese) getting the other 50-75% of the business. I’ll take things the way they are even if it means that eventually GM and Chrysler become owned/majority owned/controlled by foreign firms. Why do I get the feeling that the author would rather them have gone out of business altogether?
It’s all about ideological purity. Farago was particularly good at looking past the horrible damage that would have resulted if GM and Chrysler had died before the economy started to recover from the credit freeze. The argument that doing nothing would have helped propel a full-fledged depression was brushed aside with Randian riffs about the magic of the marketplace.
Politics is messy. The bailout has more than its share of problems. But note that the economy stopped its tailspin. We are slowly starting to recover. GM might yet survive. Do I care if it is foreign owned as long as the company is well run? Nope.
I agree that the Fiat connection is what has made Chrysler worth what it is. Chrysler and Fiat have each found the perfect partner. Each addresses the other’s weakness, and they share what appears to be very good management. All outward appearances indicate that Chrysler under Marchionne is becoming a very well run company. Ditto Ford under Mulally. GM? I am not seeing it yet. GM could be like the guy who gets his credit card debt wiped out in bankruptcy, only to run it up again with the same bad habits.
Beware proclamations of perfect marriages– they’re rarely anything of the sort behind closed doors.
There’s nothing worse than “I love my significant other *SO* much” Facebook posts.
Good point. But, after two truly HORRIFFIC marriages, I would imagine that a third that is merely imperfect would be pretty welcome.
Edward,
Love your articles as I do, but this really is on the wrong side of misinformed. While it would be a cheap shot to question the sanity of said analysts (*cough* Lehman Brothers *cough*), I sincerely cannot imagine how on earth they came to the conclusion that
“including synergies, Fiat’s stake in Chrysler is said to account for between 60 and 74 percent of Fiat Automotive’s projected value of €5.20 and €7.40 per share.”
I beg your pardon? As far as I recall, investors weren’t exactly trampling the door down to buy Chrysler – appalling management, piss-poor engineering, and quite possibly the worst product range in automotive history (excluding Jeep perhaps, but let me remind you that outside North America, its perception ranges from “Who?” to laughing stock). To even compare the brand equity with Ferrari’s is an absolute joke. As for Chrysler’s and Dodge’s brand cachet, well – that was down the drain even within the US. In Europe, anyone buying a Dodge will receive countless recommendations from friends and family alike to have their head examined. (And rightly so.)
Ferrari can sell perfume with the prancing horse – and I don’t think the launch of Dodge Caliber After Shave will be celebrated any time soon. FIAT also owns Maserati (both profitable, mind you) and Alfa Romeo. And unlike Chrysler and Dodge, FIAT is still a much-loved brand in its home market (which, admittedly, is somewhat smaller than the US).
Most other car manufacturers would not touch Chrysler with a ten-foot pole, and can I also remind you that most analysts and pundits at the time thought that Sergio Marchonne must be off his rocker.
As for American companies owned by foreign investors – is there a law in the US that keeps American investors from buying within the country?